because it is not just switzerland or the private bank buddies asset management globally and we continue to expect quite an amount of money. . .

so that we can be compliant going forward and as the chairman said any business we do with any u.s. client is done on a completely compliant aces. >> again you have reported or certainly in our reports we see the size of u.s. banking assets and credit swiss. do you have any u.s. assets in total in switzerland? >> i don't know if we do. i don't think we do have that estimate. u.s. citizen assets in suisse banks i don't have that on hand. >> no further questions at this time. >> thank you very much senator johnson. let's go to just a few facts to set down very firmly.

of the 22,000 banks the customers that you had in 2006 after you did required a showing of compliance with their u.s. tax laws and we talk about u.s. customers, 18,900 of those accounts were closed and today there is about 3500 that you have determined are in compliance. are those numbers correct? >> those numbers are correct as of today but i would like to add that in total we have breathed you'd been verified tax compliance of -- of which 3000 have been closed and the number you have mentioned are still with us. >> so what is the total number of accounts that no longer have the 22,000? >> 8000 that you mention.

>> all right. and if i may add mr. chairman we had a large population of u.s. resident clients. i think i would say 11,000 i believe. they had account balances below 1 million dollars in assets under management. they were not even given the option to stay because to move to one of our holy u.s. licensed broker-dealers you needed $1 million as a minimum balance so it let them thousand of these 19,000 or 18,000 did not have the opportunity to prove tax compliance. >> all right. mr. cerutti your u.s. persons policy required that suisse accounts open for u.s. residents

be concentrated in that single suisse office we have talked about is that correct? >> a required that they be concentrated. i think in the other office those were the 12 that were later merged in 2009. >> and the point was that that office was supposed to have relationship managers that got special training in u.s. revelatory and tax compliance? >> that is also correct mr. chairman although i would like to add that every single relationship manager with one of or more u.s. resident clients got the training. >> so you had how many managers, relationship managers had one or more accounts? >> i think you mentioned the 1800 number at the beginning. i would deduct about 1000 of those because they were dealing with expense.

they were in the retail bank mostly and whether it's five or 600 or 800 i don't have the exact number but they were all trained. >> so you had about 11,000 ecus they were trained? >> i think the number is somewhat lower. we can provide you with the exact number. >> there were about 1800 that had one more client account and as a matter of fact take a look if you would at exhibit 16. >> which page if i may ask? >> it should be numbered, the exhibits there.

exhibit 16 is a credit suisse presentation char called the u.s. project steering committee number one, dated august 19, 2008 and on the chart the last three digits 306, the title is u.s. international business activities spread out across all arguments a and and it shows beside the sla and there were another half dozen offices in switzerland has served u.s. clients. in 2008 there were over 1800 different suisse bankers with one or more client accounts and you said you wanted to deduct 600 or 800. we are dealing with expats so that would leave another 1000 would it not? >> chairman i would like to deduct the third line, the 993 because that is their retail business in switzerland.

they were mostly dealing with the expats so that would leave around 800. >> you are saying that these are then people who have special training? >> if you take the 800 and 3240 your some 650 at credit suisse. i need to check whether that's the right number but most of them if not all of them have been. trained but i don't have the details there so i would suggest we provide the staff with the exact numbers be. >> you are stemming its around five or 600? >> hundred. >> yes. c. was the training about the same whether they were at sla in her one of the other office is? >> i think they sent training materials. they spend the same amount of time on it and i couldn't answer

that question. >> there were 1800 relationship managers is that correct? >> on this chart, yes. >> is that an average charge? >> that was the chart provided for the first steering committee in august of 2008 a few weeks after your rep port that had been published. we were trying to look at it and do the right thing. i would assume that these numbers are correct. so sa ellen had 10% and 90% were spread across the rest of the bank? is that about right? >> if you look at it from an account that is correct. if you look at it from a management perspective it's a little bit different. >> you still only 10% of the suisse accounts opened by the u.s. customers were a saln? this is supposed to be the place they were going to be concentrated.

>> plus the ones that are listed because that would encompass the airport that is also an area of concentration. that is almost 60 or 70%. >> you 70% was spread out across the bank? >> i'm sorry mr. chairman. 70% were concentrated in those two groups the airport office and saln and obviously 30% particularly in hindsight would have rather seen a more concentrated so what it's rather seen the 30% smaller but that is where we were at that point of time. 70% in those two areas in 30% and the rest of the bank. >> this chart was to show according to the title how spread out this was across the whole organization. weather was 30% outside of those two units are 70% this was spread out across the whole

organization so you had 18 hundred according to relation managers that were in contact with u.s. residents people and what that means of course is when you have all those customers most of whom i think pretty clear perhaps 80 or 90% of whom were not paying their u.s. taxes that is a very very major problem for us. it can't be easily answered i believe by saying the rogue bankers were all located in saln and that is where the problem was. you had tankers that were doing things that you acknowledge were improper. in some cases egregious from other areas in saln. >> is important to point out that as we mentioned mr. chairman we have done a very extensive investigation across

the whole bank including all those as has he mentioned 1800 in all these other r&m's and we didn't find any misbehavior which we agree with you is egregious and it shouldn't have happened. we did not find it there but certainly from a business point of view we would have rather seen a more concentrated than that would have been better for common compliance point of view but we have not seen any abuses in that broad population. >> are you saying that all of the abuses we have identified and you have knowledge were found in your investigation, all of those abuses worked concentrated in saln? is that what you are saying? >> yes. >> you mr. cerutti says he doesn't even know what you call egregious conduct was concentrated in saln. he doesn't know that. >> was centered around saln but also outside of saln there was also some. >> but you would call rogue

banking? >> it's hard to exclude there weren't issues outside of that but again in the investigation and the vast bulk of that a fear was it not one area so there were smatterings of issues elsewhere as you would expect and i'm disappointed with those as well but the vast bulk of the behavior was it in that area. >> there were accounts outside of saln? >> i think the answer to that is probably yes. >> that is the problem we are focusing on of course. it's not what you are focusing on, it is what are focusing on. billions of dollars in uncollected taxes. there are a lot of reasons for that. you folks have got to look in the mirror if you want to help us identify and go after the folks who aren't paying taxes. i just want to be real clear that you have got a law there on your looks and you can't simply

say if we ratify a treaty that will solve the problem. does your law saying it's illegal to identify the names of people on accounts quest is that law go away and is a repeal? >> mr. chairman the law is not going to be repealed but the law will permit to give you all the names under the treaty process. >> give us the names which comply with the treaty process. >> correct. >> which is a long way from the named because the treaty process is going to require your bank by the way is going to be, if we ask you for the names and you ratify that treaty that's a commitment which i hope you will keep because remember under that treaty whoever wants those names is going to have to groove that the bank contributed

significantly to the aiding and abetting and this is after 2008 because we are not going to get any names before 2009 under that treaty, right so we lose all those names which are most of your accounts which were close and all of them are compliance you say because you have proved so when we ask you for the names pre-2009 the treaty goes into effect and you are saying that under this new treaty you are going to give us those names? >> mr. chairman we can give you any names of the accounts that were still open on september 23, 2009. most were closed. >> if you look at the account numbers i think that is not correct. >> 50/50 usa? >> probably that's right but let me maybe just stayed that 50% of these accounts remained in

switzerland. they went to other suisse banks, approximately 50% so they would have been opened in another bank in switzerland and you would get them through a treaty request at another bank. >> and that treaty request agaie a request that the bank was involved significantly in the aiding and abetting. >> that is again correct. >> lets just focus on that. we are going to ask you for those names i hope. we will get the subpoena power so we can collect the taxes that you can expect if this treaty is ratified that you are going to get her request for all the names prior to the effective date of that treaty? will we get those names from you? >> the treaty works the way the irs -- >> will we get those names from you, half of the 22,000 names? are we going to get them from you?

>> the suisse legal system will most likely not let us provide those names. >> don't tell us the treaty is going to get us what we want. it won't. you just acknowledge it won't. the treaty is going to do some good in the future, some good if we can prove that the banks that have the accounts have contributed to aiding and abetting and tax evasion which is not an easy proof and it's left up to the suisse courts. do we know what the suisse courts have done? most of us i hope on this treaty ratified. but don't please represent to this committee and to the public that when the treaty is ratified week we can then expect those names from you. we are not going to get any pre-2009 names because it's suisse law and if the additional names are a burden of proof on the applicant you have got to

show that the bank significantly contributed to the problem. if you don't have the names how do you show that the bank contributed to the aiding and abetting the attacks of asian? if you don't have the names of the people it's a chicken and egg problem so you have been helpful in acknowledging that treaty is not going to get is the names we are after. >> one last comment. i would say with the doj program with 106 banks that should be a very good indication, very helpful to fulfill the standard that these 106 banks have aided and abetted so i hope that you should get tons of accounts. >> you would hope it would but in terms of bank -- or bank you are not one of the 106. you are one of the 14 not covered. >> not covered by the program.

>> so you cite the program relative to two or 300 banks, 100 of which have signed up and those banks don't have to provide information? >> the 14 will apply anyway. that was my assumption. the 14 in category 1 in the doj process, i think they will fulfill the standard for the treaty anyway. we should have the 14 and we should have the 106 and that's 120 but they are not covered. >> we don't know for sure. >> i'm pretty convinced. >> you hope. i will keep going here. i think it's clear that whether we are talking about the program which doesn't apply to the 14

banks or to the treaty itself, the new treaty itself they do not give us names of account holders prior to 2009. is that correct? >> that is correct mr. chair. >> so we can't collect taxes owing for those folks which is what the heart of the problem is that this hearing. its tax collection. one of your bank's former clients admitted to tax evasion

told us about opening an account at credit suisse and he referred to the account holder as client one in our report. client one is an american citizen who when he opened the account in credit suisse main office in zürich provided a u.s. passport and driver's license and second of haitian so it made it obvious he was an american. he told the subcommittee that the swiss banker expressly told him that a w. nine form which identifies u.s. accounts and leads most importantly to the account being reported to the irs. that banker told client one that it -- this form was required by the united states and not required by credit suisse to open an account. so you open an account without the w-9 and there was no

disclosure and later on the client entered into a disclosure program. would you agree that this is a pretty stark example of what facilitating tax evasion is? mr. dougan. >> i believe you're referring to client one which as you say that first opened the account in 1990 so obviously we would look at the timing on that but basically yeah i think we view that as a process that is obviously not something we would undertake today and is not something that we in any way approve of. >> if you were under the qualified intermediary agreement of 2001 the requirement i think in retrospect was a mistake in this agreement only applied to

u.s. persons who held u.s. securities and we were very strict for any u.s. client for quite a swiss. we requested a w-9 but as nine but as you just explained there were situations where clients then didn't buy a u.s. security so they didn't have to sign the w-9 and that led them to what you just described. >> did client one open the account in 2005? not in 1990? >> 2005, yes. >> now the bank told us about 150 trips by 10 swiss bankers to the united states from 2002 to 2008 and the subcommittee has documented another 22. did the bank have training or standards with relationship

managers traveling to the u.s.? >> i think our u.s. policy was very strict traveling to the u.s.. it was only permitted for social purposes. unfortunately as we got to learn during our internal investigation people used social purposes to get the trip approved and then met other clients. >> to the bank allowed visits to clients in the united states to help them set up swiss accounts to conduct business while on u.s. soil? >> that would have been a violation of our policy. >> the bank paid, paid for bankers to travel to the u.s., 24 trips in 2007 and 2008 and not just by the way by saln but tankers alone. take a look at exhibit five g of you would in your book, exhibit

5g. credit suisse required its bankers to complete travel reports after a u.s. trip. this is a travel report in 2008 dated march 18, 2008 and it was completed by who we have determined to be marcus walder at the head of the saln office which is otherwise known as the north american offshore private banking operation. on the form the banker reports

that during his u.s. trip he visited 49 clients with assets totaling $230 million. now i think you would agree would you not either one of you could answer this, that it's obvious that this person was doing business for the u.s. soliciting clients and servicing existing clients? would you agree that's obvious from the form? >> i would say it is, yes. >> what the credit suisse ignored some policies and pay for swiss bankers to do this? to transact this? why did you approve that? >> i think it was a mistake. this was not authorize travel. they should not have been traveling for those purposes and as you say we should not have allowed the travel let alone pay for it. the fact that this was overlooked and we a allowed the

travel and paid for it is a historical mistake and i think there is no other explanation for it. >> so. >> if we had understood this activity should have been stopped absolutely at the time. >> you have tried to say this misconduct was mainly in one area of the bank. suggesting it's pretty obvious from our perspective it was all over the bank where for aiding and abetting tax evasion was going on but in any event what you would consider misconduct is not just in all one area the bank. but you said some rogue bankers mainly located in this one area the bank, that the bank approved this expenditure. in other words the person's

travel should not have been allowed. does that make that person a rogue bank or? >> our policy was very clear. >> does that make that person -- in your testimony said the wrongdoing is a small group of rogue bankers and i'm asking you was the banker that did that traveling and i don't know how many of these cases we had with all those bankers, were all those bankers rob bankers? >> they were violating our policies and as you said we should have caught them. we should have had control people but absolutely they were wantonly violating our policies. >> to the people who approved their travel where they wantonly violating? >> i think in our investigation we found was they were not intentionally doing so but they have asleep eight mistakes in allowing that. >> the people who approved the travel were not rogue. the people who do travel were rogue. is that what you're telling us? >> we did feel that this group of people were misleading at a

certain level of management misleading them as to the to the so yes these people were violating the policy intentionally and not, obviously hiding that from their manager. >> it's pretty obvious if you look at this exhibit 5g it's just over and over again hotel for dinner preparing for an introduction to somebody obviously prospective customer. we went to this person and it was followed by lunch and went in to this person followed by dinner and went to a certain restaurant to prepare for an introduction to somebody else. an introduction over the phone. >> i couldn't agree more. >> my question you say this was hidden from managers. this was open to the managers. my question is to the managers

who got these reports into the auditors who approved the travel are they rogue bankers? >> i think our view was that the managers, i'm not sure the managers did get these reports. >> they got these reports, anyway they got these reports in the auditors approved them are they part of that small group of rogue managers? >> i think if they were aware and intentionally involved in allowing this behavior they would be that is not what we found. we found that they either unintentionally or through errors allow this to happen. or perhaps they weren't visual enough in terms of their responsibility. we don't feel that they were aware of the conduct in allowing it to happen. >> even though this document states very clear and they're not doing their job is auditors that they are not reading the document. >> that is a fair comment. >> take a look if you would to

exhibit six. it's page two on exhibit six. now this is a list of important phone numbers. it was the title kept in new york suisse offices and it includes this entry and you will find this entry on page two about the third one from the top there are two actually want to talk to about on this list. entry ones says joseph derek was eric partnership and he is an internal external trust expert

and then the second one is near the bottom of that first group. sanko a.g. and that person is also an external trust expert. now both of those gentlemen have been indicted for aiding and abetting u.s. tax evasion. is that correct that yours swiss bankers work with both of these outside intermediaries to help u.s. citizens set up offshore shell entities and to open accounts in your bank in switzerland in the name of those entities and set up in their own names? >> yes in some instances they did. >> and they were called intermediaries, right? i mean that is one of the names they were called. >> i'm not sure. fiduciaries.

>> so anonymous with intermediaries, would you agree xp they sound very similar, yes. >> no the bank has acknowledge that it has also worked with other intermediaries. can you tell us who they were? besides these two. can you tell us what other intermediaries or what was the name you used? fiduciaries that the bank worked with to do what i just described, to help u.s. clients set up, this is the egregious conduct you were talking about mr. dougan to set up offshore shell entities and open accounts in your bank in switzerland in the name of those entities instead of their own names. what other names do you know of? did your people work with? >> personally i don't know of any names. >> do you know of any?

where are their the records? >> i would have to ask and go back and check. >> are there some behind you that may no? >> i can ask, yeah. mr. chairman apparently there were others buts the swiss laws laws -- under the swiss law unfortunately we are not permitted to give you these names. >> do you know how many there were? >> may i ask? >> sure. >> they are telling me that including the two you have mentioned a total of maybe five, so three more. speaker against swiss secrecy protections is preventing us from going after behavior which is criminal behavior allegedly and is this going to be cured by

the treaty? >> i would expect to a large extent we should be in the position of these names given the 38 of 43,000 people plus the name she should get through the treaty. >> you think the treaty will provide that to us? >> if you get these client names >> if we get the client names. >> when you get them. >> if and when. >> if and when. >> also declare mr. chairman in our case we are going to be completely compliant going forward. >> to the extent that swiss law allows you. >> we will be completely compliant going forward and we will be compliant with the laws. any of these structures or anything else would have to be completely compliant with u.s. tax laws. >> going forward. we are asking about names going backward. >> i've just been informed that

the doj has three names. >> that will help, thank you. now, the united states has indicted over two dozen swiss bankers for aiding and abetting u.s. tax evasion including seven for credit suisse back in 2011 and i can ask either one of you, do you know of any u.s. extradition requests to bring those two trial and i'm talking about the two dozen swiss bankers aiding and abetting u.s. tax evasion including seven from credit suisse? do you know of any u.s. extradition requests? >> mr. chairman i don't know of any such extradition request. maybe there were some but i don't know.

>> you don't know. >> no. >> under our treaty swiss insistence there is an treaty exception to extradition which allows to deny an extradition request for a person involved in a tax offense. is that correct? either one of you? >> yeah mr. chairman of the extradition treaties that the european countries have, i don't know if he u.s. may have similar treaties. >> it might but -- [inaudible] the question is whether or not switzerland would deny extradition if their request was made and my question to you both is the following.

if the united states were to make an extradition request and by the way we believe there have not been any as we believe is the case, if the united states were to make an extradition request would your bank object? i had better ask you mr. dougan. maybe on the advice of mr. cerutti. >> no mr. chairman, we would not object. >> the last area i want to talk to you about is an area that is

called net new assets and mr. cerutti one of the things we have reviewed in this investigation is that banks decisions regarding its net new asset figures in 2012. net new assets is the measure of the amount of new assets obtained by the bank on which it provides investment advice or asset management services, so this -- it is in my lingo not the custodial service. it's the investment service. is that a way to describe that which you can connect with? >> yeah i think that's broadly reasonable. >> net new assets also as a key

performance measure of the growth of the private bank and i think both banks and investors view it that way. we are going to talk about a client of your bank and we will call him client five. in 2012 he chose credit suisse over other financial institutions and credit suisse recognized billions of dollars of that clients assets as net new assets. the bank also made decisions on where in its books to credit that net new assets in the various regional areas of the private bank. reticular leap between two regional areas, switzerland and the americas region. recently you have told the subcommittee that credit suisse

has initiated an internal investigation into its net new asset process and this is a russ is which i hope will be object that to produce eckerd financial figures to the public and financers. is a crack first of all that the bank is looking into the possible influence of businesspeople on that net new asset process? >> that is correct mr. chairman as we have informed your staff. we are looking into 2011 and 2012 and it will take a few weeks or months and we will report back to the staff very at. >> is the investigation reviewing the net new asset? is that investigation something which stems from client asset or is it rocket than that? >> it will be broader. i think we want to look at the whole area that i mentioned before.

>> you told the subcommittee staff that the investigation has identified indications of the private bank's chief operating office that may raise issues, may raise issues of influence being inappropriately placed on the net new asset process. is that correct? >> that is also correct mr. chairman. that is why we want to look into it. it's too early to draw any conclusions. >> okay. were there e-mails that you looked at? >> there are some e-mails i have with that. the wording i didn't like and that is what we need to go into. i think there are a number of e-mails that we are going to report back to the step. >> do you know the names of any? >> that is a little bit difficult. some are probably in the stack of materials in here.

>> that there is no problem with swiss secrecy on that one? you can give us that information and? >> we gave you all the information that is in the u.s. and now we are reviewing also the e-mails in switzerland. we can give you a summary at the conclusion but we can at this point unfortunately not give you the e-mails that are only in switzerland. >> because of the swiss secrecy law? >> because of swiss data protection laws and the statutes. it's really unfortunate. >> okay now, the private bank chief operating officer was i believe mr. ralph spogli. am i pronouncing his name correctly? is he one of the people you are going to be speaking to as part of that investigation? >> the investigation is going to be handled by two outside law firms.

they will most probably speak with everyone who is relevant. >> are you going to be looking into whether or not the banks net new asset numbers on the books were accurately stated to the public? >> that is definitely part of the investigation but so far we have no indication that they weren't. >> are you going to look into whether the numbers on the books differ from the numbers that were shown to the public? >> i wouldn't know. >> how do you know they were accurately stated? >> that is information for the law firms and we have looked into that already. there's no reason to assume that the numbers are not accurate. could you give us time to get the work and come back to your staff? >> you are presented that year

numbers are accurately stated so now i'm asking you whether you were told by your lawyers the numbers that were on the books were different from the numbers that were shown to the public? have you talked to your lawyers about that problem? >> this is really. >> that's okay, if you haven't talked to them about it just say so. is that true? >> i don't have the information. >> that is not my question. have you talked to lawyers about whether or not the numbers and the books are different? may i just ask? >> yeah, sure. the lawyers informed me that you might be referring to internal scorecards versus external,

externally publish numbers. >> looks versus public statements? what is an internal scorecards read. >> as you know we have a very robust and crisp process around all of our public weight stated numbers. this is another one of our publicly stated numbers and we are going to look into this and we also have a set of what we call management information. you might think of it as mis so there are mis numbers that we used to judge individuals performances and groups performances and those have a number of different rules that may depart from the public number stated. in some cases you might double count revenues in order to provide certain incentives to different groups and use it as an internal accounting method. >> we call them books but we will get into this a little bit more. take a look at exhibit 21 if you would.

now this is a credit suisse e-mail dated february 2012 and the subject is important -- nna. the beginning of the e-mail is on the last page of this exhibit so it's 84 and it says we will again discuss our n. n/a results which have been very

disappointing up until now as her capability to attract clients with new assets is of utmost importance also externally you need to take all possible measures in order to change this into a positive story with the -- within the next weeks. now this is a memo from mr. boley, is that correct? >> that's correct. >> did he work for you? i will guess i will ask mr. meister. did he work for you? >> that is correct. >> he was the chief operating officer? >> he was the chief operating officer and the cfo for the division. >> he was then saying you have to take all possible measures to change this into a positive story in the next few weeks and i guess you were in on, you were around the e-mail i get there. so he was pushing towards a

particular and na results in part because it was reported. >> the e-mail was february 27 and generally because it is one of the key performance indicators he makes everybody aware that all possible assets positive or negative. >> he didn't say that. >> no, but it's a normal process. >> i'm just saying what he said he needs to take all positive measures to change us into a positive story. that is not positive or negative. he didn't say change this into a positive or negative accurate story. he said we have to take all possible measures to change this into a positive story. how do you say positive/negative when he says positive?

>> i am copied on the e-mail but perhaps the language is not the appropriate one but generally it is that we go through all the possible bigger tickets with the bank if it's a change from custody on the asset on the management. it's the normal process of the cfo including the coo area going to the bureaucrats all over the world before the end of the quarter. spam. glad to hear that you seek accuracy at the end of the quarter but this is and what this e-mail says. this doesn't say we have got to be absolutely accurate as we are making external statements. it says we need to take all possible measures to change this into a positive story. that is a deviation from your policy i take it? >> we agree with that.

we have a quarter and process to ensure that all of our numbers are recognized properly and you are right this kind of language is not consistent with the way we think about it. >> take a look if you would add exhibit number 26 mr. meister. this is another credit suisse e-mail. our ambition to deliver wealth management clients and an aide of 67 billion swiss francs in the fourth quarter is at risk. that is our ambition to have an accurate statement. it says we have an ambition to deliver wealth management clients of around 67 billion. i take that back. i misspoke because this is a slightly different issue.

what he is saying we want to bring in six to $7 billion that is a more accurate reading from what i said a moment ago. i don't see anything particularly wrong with saying we have an ambition to add it, nothing wrong with that i don't think. then it says three weeks to go until the year comes to a close and we still need three of point 3 billion. this requires efforts on all levels. what does that mean efforts on all levels? >> to give you perhaps a little perspective even if the language perhaps could not be quite clear, you have a normal in an outflow of assets but you have the so-called big custody clients like the client you had where we are looking in every single quarter. this is what is intention was.

the intention of the klein and that provides we could apply and for that you have to go through all the different regions to look on these tickets. there is a change and of course they have to go back to the relationship to look and in advance at the end of december that is what really the intention was even if perhaps the language is not exactly what you want to have. >> he mr. chairman may i interject? >> sure. >> is hard for me to say what he was intending but if you look at this e-mails specifically the people he adjusted to a the sales managers so the people interfacing with the client's said to do have an ambition as you said earlier for a target this would be similar to the sales part of the quarter and addressing the sales managers seems to be a normal course of business looking at it

objectively. >> he did you discuss, either one of you did you discuss with mr.'s subeleven to meet an external nna target. >> i wanted to play not before. we always push in our function. that means that all new and tense of the client or investment advice is reflected and at the time in charge of this process made aware to all the business -- but they have to take responsibility and ownership to look at this. >> did you ever talk to him about the language of this e-mail? did you ever talk to mr. bogley

about the language in his e-mail? >> not to too my memory. >> he okay. mr. meister during 2012 client side was shifting assets apparently to bring them under the investment management of credit suisse and his assets were a big boost to the banks net new assets total for 2012 and this is especially the year when net new assets were under pressure because the bank didn't have much new money coming in particularly in switzerland. now, that is one issue. it's not the issue i want to

focus on today. when the bank showed nna stemming from client five's assets the bank had a decision to make about what region should receive the credit for those assets so one issue which i'm not going to focus on has to do with whether or not that was properly centered custodial or investment and whether he properly shifted it to investment in the absence of a signed agreement and again i'm not going to focus on that piece. i am going to focus however on the decision as to what region would receive the credit for that as set and he said it was your decision i believe mr. meister and you decided to split that net new assets 50/50 between the two regions of the private bank americas in

switzerland, is that right? >> that's right. >> he told us he made that decision early in 2012. is that correct? >> that is correct, yes. >> now i want to discuss what ashley happened for that net new set account from client five in 2012. in the first quarter, the nna net new assets for client five was actually split 60/40 between americans and switzerland. now why wasn't it split 50/50 between the americas and switzerland like you said? >> i don't know. >> he okay the second quarter the nna for client five was not split at all. it was entirely credited to americas. why? >> also, i don't know. >> he the third quarter the bank went back to the beginning of the year retroactively added up

all the client five assets, divided in half, deducted 1.6 million from the americas, added it to switzerland. retroactively. why did you do that? >> also i don't know why this was done in the third quarter but it was in line with my original decision to do it 50/50 because the story looking back at the last 10 years and two years before the client decided to sell his company. >> it also had a major effect did it not on net new assets for switzerland? it made it look a lot better than it otherwise would have? >> to split the 50/50 generally? >> no, the retroactive shifting around these numbers made switzerland look a lot better than it otherwise would be so with --

vis-à-vis the american section, right? >> that is right, yes. >> mr. chairman that certainly, the impact of that we also show more transparent disclosure on those net new assets in switzerland than we had in showing outflows in switzerland so we are very, we are not trying to hide the fact that there might be outflows in switzerland because of certain business trends so as you say there was an effect from that but again our view was what really want to show the accurate numbers which is the 50/50 split was what we thought was the accurate way to do it. >> he if i may? the only thing i would add i was in their regional role in the americas and this is somewhat preferable -- peripheral but i do remember issues around this client. there were multiple people

involved, the investment bank and people to the private banking people both in switzerland and the united states in its difficult to determine whether it's a 60/40 or a 50/50 or 25/75. it was clear certainly from my sake that there were several people that were part of winning the mandate for this client and as long as i have managed businesses that involve people from different breaches there have often been arguments about who gets credit for what so when i heard about splitting this thing down the middle that did not seem inconsistent with what i observed with the fact pattern. >> that is not the question. the question is the shifting around. that is the problem and it obviously hasn't impact, and impact obviously to what the public perception is. would you agree mr. dougan?

>> in terms of the overall financial results this is one element which i would say in seven years as a ceo i've been asked a couple handfuls of questions about the nna number so i'm not sure it's that important and issue that the investors focus on it at you are right to read. >> are you serious? that is not a factor that investors focus on? >> it is a factor but not high on the list of importance with most investors. >> would you say it's a factor for investors? would you say it shouldn't be manipulated from quarter to quarter to give a particular impression or toav or to avoid d image? >> of course. >> well that is what happened here. it was shifted around from quarter to quarter and it retroactively was shifted which didn't help switzerland were the swiss operation looked like a

got a little bit of net nna. >> mr. chairman i understand of course when you look at that. >> that is the chart we are we are all looking at now by the way. >> one thing i wanted to add we have the discussion with psi and when you look back is at 11 in the last quarter of 2013 we are not shy to show negative numbers. we have the glass quarter in 2013 which is a negative number so we do an investigation into the 50/fifth to split out.

we have implemented this is a part of our investigation and hopefully we find out the reason it was done not in the second but retroactively in the third. >> it was to make the swiss operation look more positive than it otherwise would. >> as i said we are not shy. >> you were not shy now because you don't have the opportunity to do this. somebody that is make decisions whether or not to have an investment of this $5 billion or whether or not to put it in custodial. you may not have 5 billion coming in every day. that $5 billion is a huge part of what happened this year and the retroactive shifting around of the division of that number between the regions doesn't happen every years or you may not have an alternative. you say you're not shy but maybe there's no way of knowing whether or not you have the same opportunity. my guess is you didn't but that is my guess. take a look at exhibit 25. this is a credit suisse e-mail

dated october 5, 2012. this is what the third quarter nna. the e-mail shows the math of the retro split. it meant that the tanks internal books whatever you want to call them, you know the different word for books. mr. dougan? >> we call them mms management informational system. >> your own internal management books had a different number from the external book and here's what it says in this e-mail. as per your request please find below the bridge, the bridge for the nna for third quarter 2012 is reported internally for

private bank americans. versus the external release figure has reported internally to private bank americans versus the external release figure. there it is. you were very much aware that there was an external release figure that was very different from what you are showing internally. why? >> mr. chairman as i tried to explain before and didn't do a very good job that's a very common, that's a common occurrence within the bank is we do -- >> on this kind of an issue on nna? >> we are trying to provide the right incentives for our sales force is and if you think of the mis side of things is more like a sales credit issue which is not as influenced by the financial statements and it happens in this kind of an issue

and it happens in all sorts of issues, revenue splits. >> i'm only talking about something that is shown to the public where it is different. at a very critical time for your bank and what the effect was you are saying was a coincidence? >> what i'm saying. >> are you saying it's a coincidence? >> we have specific rules around how mis internal numbers are calculated and in fact what i think this e-mail is laying out is a reconciliation between what is important from an mis point of view and management perspective versus the financials and we have this every quarter. every quarter there will be a reconciliation between how we -. >> on nna you would show this pic of a gap? >> yes the size of the gap may vary from quarter to quarter but there are a series of rules and the way we think about it internally versus the external

numbers. >> which is more accurate? >> i wouldn't know how to answer that. for external he reported numbers we have rules which we follow and i think as mr. cerutti said we are going to look into whether we are following this faithfully and internally we have a different set of rules and terms of how we think about and show the numbers and to manage and motivate our sales forces. >> can we agree and we agree on one thing switzerland hadn't received the reallocation that quarter were shown a negative 1.50 yen in nna? would you agree with that? >> that is correct but also i would point out that should've been 50/50/500 along which means switzerland would have benefited from the first and second quarter so in fact we penalized by not properly recording that 50/50. you are right it effectively penalize switzerland in the

first and second quarters so if someone is trying to intentionally benefit switzerland they did it poor job because the first two quarters it was the other way around. >> the question is and is it benefiting switzerland. the question is it showing switzerland of the positive for the negative? that is the issue and by shifting this month retroactively you were able to show publicly externally that switzerland slightly up instead of massively down. that chart of their shows massively down. that is what your internal books show. publicly you show slightly up. that is not casual. that's important. that is what people count on or one of the things that, and when they invest. now take a look at page 135 in the report.

>> page 135. >> visited page from your third quarter earnings report. it is headed swiss francs 5.2 billion net asset. >> page 134. >> did i give you the wrong page? sorry, 134. this is a page from your third quarter earnings report and it says swiss francs five .2 billion net assets driven by inflows and international looking centers predominately from emerging markets.

that is what you shown the public, inflows and then you look at this on the right-hand side strong inflows from asia-pacific, nna with strong inflows and look at that third one, positive contributions from americas and switzerland albeit seasonal slowdown. now mr. dougan i don't think you can fairly or honestly say that this is a relevant, this representation to the public. would you agree? >> of course i wouldn't say it's irrelevant. >> and the result of putting aside the motive for a moment it was the result of that retro shift, is that correct? >> the regional allocation was obviously the overall number you reference the 5.2 would have been impacted but the regional allocation -- >> it would have.

how do you think this would have read if it said positive contribution from america's and negative in switzerland? do you think that gives a different impression to the public if this is what it had has said or doesn't make any difference blacks nobody read these things anyway. >> i do think they read it and it does need to be correct i don't disagree with you. i don't think it would have been a significant in terms of how the earnings results would be perceived because it's a more regional allocation. i'm not trying to minimize it but it is relevant that it is a relatively, to detail in the overall -- >> it's not a detail when you say positive results. from switzerland albeit seasonal and look at your chart. you call it a detail and i call it something that investors would presumably look at.

i hope they care whether or not your bank is profitable in all the regions or which reason -- which region it is in which it isn't but look at the third quarter chart review showed to the americas .2 plus for switzerland, .12 us so that it's all on the upswing for your entire bank and you want to buy the way you say it's the entire bank which counts. that's the five .2 net assets, you think that's the only thing that counts. there is something else that counts. as a visual you created that shows generally on the upswing and if that visual had reflected what division was before the retroactive activity you would have had a big increase in the americas and it did decrease in switzerland and that would be a hell of a lot different than what you charted.

would you agree with back? it would be a very different impression visually. >> i would agree and i agreed the numbers need to be accurate. i agree with those comments, yes. >> now is the bank going to look at this process to try to avoid this kind of a situation where your internal books i'll call them are different from your external to this degree? are you going to change any procedure at all? >> we are going to look into the whole process and we will take whatever measures we need to take and i think it's mr. cerutti said it's premature to talk much about that mr. chairman but certainly we believe it has been a process

but we will look at it and make sure that it doesn't certainly make any changes we need to make to it. >> just take a look at exhibit 28. this is a credit suisse e-mail dated january 2013 regarding americas and this is what mr. bogley wrote. wealth management clients runs for nna substantially below the expectations. in order to support the private bank division a further, now he refers to client five, portion. >> sorry mr. chair.

we are having a problem locating the document. which number are? >> 28. >> okay, we found it. thank you. >> it's down at the bottom. this is from mr. bogley and it is dated, you have the date. currently, so dear tony for q4 reporting wmc runs for sub -- nna substantially below expectations. the latest indication for you regional estimates approximately 2.8 million nna compared to a predicted forecast of 3 billion which is an excellent result in stormy times however and this is what i want you to focus on, in order to support the pv division of further portion of .9 billion swiss francs fully recorded in

turn away and externally the americas region would be a great favor, a great favor for our division. is this the way your bank should operate? >> no, it's not. that is not languished what we would agree with and is not consistent with the process. so no, we don't think it is. >> mr. meister did you talk to mr. bogley about this before he asked her colleague for a favorite? ..

>> that we have the asset number and we are more happy if there are bigger portions would always in mind that what is allowed. >> you can say always in

mind but that is not what the emails say. the question is, you were reported as being extremely happy that favors were granted. that is my question. >> mr. shaffer -- to 99 you familiar how the banks showed $8.5 billion in 2012 as a result? >> yes. and recognition by klay and five? is that correct? >> we have a process specifically senator.

we have an independent committee as a whole. for larger transactions their findings have to be reviewed and signed off as the cfo of the americas. >> continuing look at exhibit 29. on the second page, have played down the e-mail

indicates carlos asks for further detail and it was responded we need to create a more powerful story of a sense making more around the existing week figures in the sense with these accounts of hell that this branch. with a high interactive level. blah blah blah. that may not be relevant but it sounds good. i am convinced we get approval soon.

you know, what that is? does that language w.? >> if it is troubling but was not copied on this e-mail. it did not go through the independent committee and the finance organization as well. >> it might not be relevant but it sounds good? is that how you operate? it is not relevant blah, blah, blah? what do you think mr. dougan? >> i would prefer certainly that is not consistent with our process and i think as mr. shafir said would it

could mean is a story that is made up on the other hand, if there are enhanced fax that support it. >> to get a better input to the story. >> it may be hard to determine. i agree we have the same concern that is what we looked into. >> if we do have problems we address them. >> you did not see the

e-mail? how about you mr. meister before today? >> not to my memory. >> is this the appropriate way to make existing figures. is that a corporate? that with that granule rarity i don't know what it really means with the german-speaking visitors is also taking into

consideration it is difficult hastily on this e-mail. >> i hope mr. dougan you would take a look at the process it is represented to the public cannot be accurate to recognize as a favor. >> i would agree. >> it could not have enhanced the stories progress has to be accurate. >> i would agree. >> what is the enhanced story? >> he is not a native english speaker but the way you interpret we agree. >> is the e-mail.

>> don't you want enhanced profits? >> i completely agree. >> you don't think there is more around the week figures ? it sounds rather good? >> this process is not a good process. >> and i do believe the process is a good process we will get to the bottom and figure it out. what are the ultimate decisions that is a different issue. it is not acceptable.

>> it has been a long hearing. we are grateful you appeared here today. and your cooperation with the subcommittee we will afford with the report to promise to give us and the bottom line for me is that your bank is a bank that wants to be racine as a reform bank. that is something which is important to you.

but he would not want to have them have help cheat on their tax is. it is important if you are a reform bank that you have to it knowledge what is clear in their reports the wrongdoing we need full cooperation we need your cooperation. the bank right now is hiding behind a swiss law that cannot be recognized in any other country. we have to apply our own bus -- was banking in this country you have to abide by our own laws you have to

explain banking and other countries you cannot site swiss law that says account names will be kept secret. that levied the enforcement of subpoenas and other actions. to recessed the hearing we will resume at 3:00. with the full committee hearing room the department of justice has and forgets. he has to go to the white house the reason of the delay. those that would be here

this afternoon it will be a different location. you are excused. >> thank you very much. [inaudible conversations] [inaudible conversations]

>> calling the second panel love with this is an assistant attorney general to the u.s. department of justice we thank you for being with us today. we look forward to your testimony. when mrs. that testify i would ask please stand and

raise your right hand. do you swear the testimony you're about to give is the truth the whole truth and nothing but the truth so help you god? we will use our typing system today before the red light comes on the light will change from green to yellow so you can conclude your remarks the testimony is printed in its entirety. limit your oral testimony no more than 15 minutes -- five minutes we will return to questions. >> thank you for accommodating the scheduling we had to do today. it is appreciated. thank you for inviting test-tube testify this swiss

bank facilitation of the aged with me is the assistant attorney general for the tax division that oversees the department tax enforcement program. the department of justice against institutions of cross border tax evasion as well as the individuals and the bankers and accountants and lawyers and other professionals. and weld the initial efforts have focused on susan landry of expanded investigations to go after tax cheats those that assist in india and liechtenstein, luxembourg and caribbean countries. with charging professionals

72 individuals that pled guilty or convicted at trial. just as important our enforcement efforts have driven over 43 taxpayers to disclose the offshore accounts to pay a total of $6 billion of back taxes penalties and interest and that number is growing. as the committee bill those with secret foreign accounts it is difficult and time-consuming. it requires us to use all the tools at our disposal to be creative and innovative. we must pursue not just legal avenues of grand jury subpoena and discussions with the swiss government for what we need. to make full use of cooperators and whistleblowers and i can tell you for your receiving the information from

individuals with the offshore cases we're working right now. the department may seek the enforcement of the nova scotia grand jury subpoena for the swiss records but those cannot always be effectively employed first only used against a foreign bank that has u.s. presence in the majority of the institutions are your current the investigating. second, the bank of nova scotia grand jury subpoena for territorial records could have protected the litigation. acquiescence by the swiss government the bank may be caught between contempt sanctions and the west were violating swiss law or blocking order. with ongoing criminal investigations we are limited but we can disclose publicly. just because we cannot

disclose does not mean we're not actively pursuing these cases. i do want to discuss that we fully expect additional public developments over the course of the coming months. of authorizing four separate orders with the u.s. correspondents' accounts and successfully have to account holders with the personal records of the foreign drinking committees. in february 2009 the department has taken public action against two other banks january 20131 of the oldest institutions with

guilty of conspiracy to defraud the united states ordered to pay substantial fines. as a result of the criminal conviction it was forced to close its doors that sent shock waves through the community of bankers in switzerland engaging in facilitating u.s. tax evasion. liechtenstein bank intervention on prosecution agreement and paid substantial fines. what is noticeable in with the banks' cooperation have liechtenstein change the bank secrecy laws retroactively. with u.s. account holders. the department publicly stated 40 banks have been authorized with the use of swiss bank accounts this is an addition to cross border

activity in india, israel lichtenstein luxembourg and several caribbean countries. of fundamental issue with cooperation from swiss banks is the degree to which the identity of account holders and for this reason the department and the irs engage in representatives with the swiss government. august 29, 2013, the department announced the program for non prosecution and agreements to spanks not currently in your investigation i want to emphasize the program

expressly includes a 14 swiss banks we have targeted and actively investigating each of those will need to negotiate a separate resolution with the department to reflect the severity and magnitude. nor does it offer or provide protection and immunity to any account holders or foreign advisers. to provide an opportunity to banks did -- to have self report they have committed or facilitated u.s. tax evasion with those with the intent to participate in the program. requires extensive cooperation including full discussion the names of

employees and third-party appraisers with each of the u.s. accounts. to the cones that closed after they became public to provide information to allow the department to follow the money. we will give detailed information to enable us to go after swiss banks around the globe to where they were transferred. in addition require the cooperation each must pay steep penalties with the magnitude and severity of the bank's contact to get out of the business with tax evasion. to represent an opportunity to obtain valuable law-enforcement information that is new to the department and a source the department did not previously have.

the account holders revealed bartender's was lobby can use the information the banks are obligated to provide to formulate more effective request to obtain that information. -- to require those the banks are obligated and then with the expedited basis. it is working to some extent we cannot disclose the details publicly the irs has advised us to increase the number of taxpayers participating in the offshore disclosure program

is the senate would ratify the new treaty with the swiss confederation of the double taxation with respect to taxes on income ratified switzerland 2009. as you mentioned there is a hearing on this treaty before the foreign relations committee. as a result of a 43,000 individuals have self reported they held secret swiss bank accounts of interest and penalties. before 2009 the average number of voluntary disclosures to slightly hundred per year because the

will provide information globally anyone who is not yet come forward to disclose the secret bank account anywhere is on notice their time is running out. the department is engaged in robust enforcement using all available tools to enforce the law we have at our disposal. think you for the opportunity to appear to discuss efforts and for your strong support of the law enforcement matter. we're happy to answer any questions you or the members of the subcommittee may have this is the opening statement of my self.

>> on page four of the statement with respect to obtaining information to that swiss law permits disclosure under the convention between the united states with the avoidance of double taxation with then comes signed in 1996 that swiss law prohibits meaningful cooperation. as part of the efforts to engage in a series of discussion is with representatives of the swiss government. the bottom line the problem that we have that they will speak for themselves about

their losses -- losses instead of a year after year after year in 2011 issuing subpoenas to credit suisse that have not been in force. we have tens of thousands of names that had evaded taxes that we either have to go as a swiss well we are florida about. -- hour of we are operated out and to implement our laws. why do you focus in your testimony with a series of discussions with the representative of the swiss

government? that is what we did with ubs with the embarrassment in the investigation with ubs to turn over names. to a figure of guide -- died in the tax evaders that led to people paying their taxes this year that once ubs released names. names. location and location and location you have to have late -- names. the program that you have to get bits and pieces then

make treaty request the -- that is a goose chase. what we need is to see aggressive implementation 2011 credit suisse subpoena. please don't see any enforcement. you issue a subpoena. you have not enforce it. one other thing about this treaty request. not so willing to rely on the process i hope we ratify the treaty. let me make that clear.

i hope we ratified. those are the major names that credit suisse has before 2009. through the. and something else. the swiss unilaterally announced the protocol will mont apply unless the person that makes the treaty request will show the bank significantly contributed to a pattern of conduct.

you don't have the names. it is the chicken and the egg kind of a deal. then to make a treaty request. it is against the bank now under a unilateral law passed by the swiss you have to make a show ring. there was one made in a swiss court. the weekend every effort we've made to pierce their secrecy. it is a lot of switzerland. we have not always been able to rely on the treaty process the deputy commissioner told u.s. court the following about the treaty request. he said he spoke with the officials on january 21st

january 21st, 2009. during that conversation i've learned the swiss government a final determination for a request of records of 12 accounts. they will not provide records to the irs. with the litigate is a swiss court. the government decision to turn those over to the irs. the american court not clear if ever it will. has the authority right here at home to handover client names and has been established law 30 years the foreign banks operating here in united states with a

grand jury subpoena with the offshore offices must obey by the subpoena. it upheld the subpoena and said that the bank of nova scotia they cannot simply acquiesce the united states criminal investigation whenever there is a conflict with the interest of other states. the subpoenaed documents should not be a decisive factor the nationality of the bank is canadian as pervasive in the united states as with credit suisse. you cannot expect to abate sulfur of the benefits of doing business without accepting the obligations. to have the ability to

control our own destiny we don't always have to play ball with the other country on their plate field. -- playing field. but with a direct line of evidence and in order to identify the tax cheats to collect what is owed to the united states government. fed is a much more productive way to move forward and it is a proven way to get names in the ups case. if you accept the decision of the parliament unilaterally place limitations on the 2009 protocol? >>.

>> i share your frustration to get the names with the cal holders, u.s. taxpayers and swiss banks to hide their money from lawful taxes. this is a source of frustration from the day i got into office as the deputy attorney general. to go through the analysis with the bank of nova scotia as subpoena and what we have determined it would give us, we have never seen the bank of nova scotia subpoena that has produced a record from switzerland. as a contempt citation from the court with funds that would go each day many institutions are very wealthy and can afford those lines and don't want to run

afoul of swiss law. you can only bring one against a company or financial institution in the united states. is credit suisse in the united states? >> it is. but the ubs example is good because it informs how we try to get through this very frustrating for equality that they put up. in that case they built a case against ubs. at the end of the day the names came through the resolution of that case then ultimately a treaty request that produced 4700 account names. of many more given but only 4700 produced as the treaty process to the deferred prosecution agreement.

the best way to go about its is a strong criminal case against the banks in switzerland that are fostering this tax evasion by a u.s. citizen. the way to get about information to give a solid case that involves that seems to be the real brick wall but a lot of the discussions about the internal bank records and how they conducted their business about food the employees were who were fostering in facilitating the tax evasion here operating and condoning so we can bring criminal charges here in the united states against the financial institutions and officers

and employees. when you do that's the lesson is how you get accounting records out of the swiss. >> my time is up. i will get back to this when it comes back to me. >> mr. chairman i will defer at this time. i have another meeting. >> mr. chairman, i am no boy years ago what types of criminal charges would you bring and what are the challenges against a swiss entity? >> there is whole host depending on what evidence you have 80 and abetting to conspiracy to defraud with what the best alternatives would be but there is a number of provisions in the

tax and criminal code that could be used. >> what are the criminal charges? >> i was not here during that time it was a deferred prosecution agreement. what were the topic of that agreement? >> i also was not here at the time but it was conspiracy to evade taxes. >> was trying to establish the obvious why does switzerland have this huge banking sector it is there value their can they diversify where they hold their money? i am not opposed but i am totally opposed to tax evasion. my guess is the reason it is so utterly opposed to any transparency they don't want

to destroy that safe haven. so there is no tax ride the chairman mentioned the 2009 treaty that was very different. is not a panacea. >> talk to me and the senator has described a number of polls. there is no treaty that is perfect we need to combat this problem from a number of different angles.

you have to have a number of different strategies to break through. >> i will is commenting under the treaty we are required to establish with high-end tax evasion to a relevant standard with the protocol to any tax enforcement to give information with the civil and criminal protocol to enhance the ability to get information in that way how to allow the banking system for other reasons and eliminate this the protocol goes a long way to addressing that issue.

s to the other steps that the banks have taken. >> describe how. >> switzerland ratified the protocol that enables us to get information from its banks when we need it for tax enforcement reasons. a far simpler approach they have not. >> that requires us to have knowledge that there may be some fraudulent activity occurring. correct? or not? in make we need to be able to say the information we're looking for is relevant to tax enforcement efforts. the senator is correct this wes -- the swiss show there needs to be involvement.

and under this program that was not already endure investigation that need to tell us what they did in reflect the wrong goal -- wrongdoing was. we believe that gets us the account information. >> that is not a blanket information. >> with the treaty effect today known as pattern request.

>> what type of accounts with that reveal? a high a percentage? are we scratching the surface? 238 names of the list of 22,000? with the standards of the protocol with the bank program is a high percentage of the accounts that is currently in switzerland with those that were closed and transferred with the high percentage with the interaction between them. . .